Weather

Key Weather Issues

1) US Gulf Coast Hurricanes:

a. Texas Hurricanes impact the most refineries and East & North bound pipelines affecting East Coast and Denver and Chicago supplies

b. Louisiana Hurricanes impact mostly East bound pipelines affecting East Coast supplies

c. Jet basis relationship to Nymex ULSD can spike to over a 25 cent differential

d. This managed by buying the jet/ULSD basis for August through October

                                                    i.Buy volumes as close to your burn as possible with the understanding that buying this basis adds artificial OTC demand for jet

                                                   ii. If a hurricane his prepare to sell the balance of your hedge within 3-4 weeks

e. Crude supplies increase due to refinery shutdowns, pipeline shutdowns as well as significant delays in cargo imports

 

2) East Coast Hurricanes:

a. Impacts gasoline and ULSD demand

b. East Coast pipelines from the US Gulf back up due to lower demand increasing tank storage inventories on the East Coast

 

3) Buy the USGC jet basis to ULSD and the ULSD crack to WTI (August-October) (You could buy the USCG jet crack to WTI but less liquid and not good prices at the same time)

a. WTI typically weakens relative to Brent due to US refinery shutdowns